4 Firm Benefits of Sponsoring Women as Leaders

Purple No. 4 billiard ballWomen leaders provide 6 advantages to the market and 9 benefits for their sponsors.

By Ida O. Abbott
Sponsoring Women: What Men Need to Know

Most male leaders today under­stand how important it is to keep high-performing women in the pipeline and help them achieve their potential within the organization.

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These men are genuinely concerned about their firms’ inability to retain and advance the women they hire because having a substantial number of women leaders is a demonstrably significant benefit to the company, while a lack of gender diversity at the top of organizations can be very costly to the bottom line.

In an increasingly competitive market for talent, retaining the best people and placing them in executive roles where they can have the greatest impact is a business imperative. Abundant research shows that companies with higher percentages of women leaders and senior-level managers tend to outperform their competitors.

Studies by numerous organizations have shown repeatedly that having a higher percentage of women in leadership produces quantifiably superior financial results.

Four examples:

  1. Pepperdine researchers found that firms with the best records of put­ting women into top leadership were 18 to 69 percent more profitable than the median companies in their industries. After studying perfor­mance data from Fortune 500 firms over more than two decades, they concluded that, “the correlation between high-level female executives and business success has been consistent and revealing.”
  2. McKinsey research has shown that companies with more women in senior management demonstrated the best financial performance, had 41 percent higher returns on equity, better operating results and higher growth in stock prices. Companies with three or more women in top positions (on the executive committee or board) scored higher than their peers.
  3. Catalyst research has found that Fortune 500 companies with three or more women in senior management positions score higher on top measures of organizational excellence. Those companies with the most women board directors outperformed those with the least by at least 16 percent in terms of return on sales and 26 percent in terms of return on invested capital. In addition, companies with three or more women on their boards outperformed the competition on all measures by at least 40 percent.
  4. Thomson Reuters found that companies with greater gender diversity perform better economically, especially in harsh market conditions.

The Changing Marketplace Demands Women Leaders

Women possess strengths that are critical for leadership in a chang­ing marketplace.

Historically, since men were the only players, they designed and created a business world where success was based on masculine traits and behaviors. Women who entered that business envi­ronment adopted or at least adapted to masculine behaviors in order to succeed.

But the business world is changing, and to operate in the evolving marketplace, the new model of leadership will need to incor­porate feminine qualities. Several worldwide studies published in 2013 revealed a growing appreciation for the traits, skills and competencies that are perceived as more feminine, and a strong consensus that those traits are essential to leading in an increasingly social, interdependent and transparent world.

Considerable research shows that additional business advantages accrue to organizations with a substantial number of women leaders:

  1. Women executives perform better than men in leadership competencies and they are more creative and effective at problem solving.
  2. They are also better able to address clients’ expectations because more of those clients are women.
  3. Women-owned companies now account for 40 percent of all privately held firms.
  4. The number of women-owned companies is growing at a rate one and a half times the national average, and their revenue and employment growth exceeds that of all but the largest publicly traded corporations.
  5. In addition, women are now the sole or primary wage earners in 40 percent of U.S. households.
  6. Many of those women are in purchasing roles where they manage, operate and make decisions that place far more value on feminine attributes that were previously undervalued.

With an increasingly female client base, a dearth of women leaders and women-led teams deprives a company of perspectives needed to understand and serve women clients.

As an example, women approach decision making differently, so traditional sales techniques may be ineffective with women buyers.

In one study, Deloitte noted that women executives who make hiring decisions for professional services use different decision-making styles than men. Their internal research found that in sales pitches, partners were using a traditional selling style that was developed when most buyers were men.

So, under the auspices of Deloitte’s women’s ini­tiative, the company taught them selling approaches that take gender differences into account. Whether buyers were men or women, sales results improved when partners were more sensitive to gender diversity and able to adapt to different individual buyers.

As the number of women decision makers continues to grow, this trend will become more apparent and more important. It will have particular impact on professional service firms, as more women are in positions to hire and fire outside providers.

Firms today want to promote more women to partnership. Clients demand gender-diverse teams; the people who buy services are increasingly women who want and expect to hire women; and the competencies necessary for success now include traditionally feminine strengths, such as interpersonal and collaborative skills.

Additional Benefits to Organizations

Organizations with high numbers of women in leadership benefit in other ways that are essential for long-term competitiveness:

  1. They are better able to satisfy client demands for diverse teams.
  2. They avoid the high costs of attrition, reaping greater financial re­turns on their investment in hiring and developing talented women.
  3. They do not face the problems that women’s departures sometimes cause, like annoyed clients, disruption to existing work teams and client relationships, and declining firm morale.
  4. The presence of successful women leaders makes junior women be­lieve they can succeed at the firm, inspiring them to stay and sustain­ing their motivation to advance.

Benefits to Sponsors

Along with helping their companies, sponsors also benefit personally from championing rising stars. While some sponsors are motivated by altruism or the desire to develop young leaders as part of their legacy, all sponsors receive tangible benefits from their efforts on behalf of protégées.

Some of those benefits include:

  1. The loyalty of emerging leaders
  2. Access to outstanding performers with top-notch skills who support the sponsor’s work
  3. Allies who can support the sponsor’s business and professional goals
  4. Expansion of the sponsor’s network to include influential leaders throughout the organization
  5. Insights and support from top performers whose skills and talents complement and expand the sponsor’s expertise
  6. Perspectives that differ from the sponsor’s, enrich his understanding and expand his thinking
  7. Information about organizational issues, personnel and operations of which the sponsor may be unaware
  8. Retention of top performers within the organization
  9. A reputation as someone who “creates” leaders

The health and prosperity of companies depend on achieving gender balance in firm leadership. Companies where men actively champion women create an environment where women are more likely to achieve higher aspirations, where profitability grows and stays strong, and where the full benefits of gender diversity are more likely to occur.